Debit-card debate: Use a PIN or sign? Either way it will cost you


Some of us do it every day: We swipe our debit card then either sign our name or enter a PIN number -- and (voila!) the purchase is done. But little do consumers know that when they sign for a purchase they are costing retailers significantly more than if they enter their PIN -- a fact that could end up costing consumers in the end.

According to a recent New York Times report, banks and retailers are enmeshed in a tug of war regarding debit-based fees. It turns out that when a customer signs for a purchase using their debit card, the retailer pays the bank almost twice as much in "interchange fees" than they would if they had entered a PIN instead. Visa, in particular, has built a dominant position in the debit-card market by steadily increasing the rates it charges merchants when a customer makes a purchase with their debit card. Those fees, which the Times says averages 1% to 3% of each transaction, are then passed along to the bank that issues the card. The fees can really add up: interchange fees account for $45 billion in revenue, the newspaper says.